An Empire City of Dreams

By Robert Strauss

“You come here and everything is going to be new,” said Saqib Rashid. “Where you live is going to be new. Where you work is going to be new. The malls you go to are going to be new. There are more construction cranes here than any place in the world.”

Rashid, WG’06, is not a suburban American salesman selling tract housing circa 1958, but a recent transplant to Dubai, United Arab Emirates, the mix of Vegas on the Gulf and serious business center that has attracted more than a million expatriates to settle there. Rashid, like many of those expats, is effusive about Dubai’s possibilities.

“It is a great place for young families. There are as many youth soccer leagues here as anywhere else,” said Rashid, who came to work in private equity in a family-owned business, Abraaj Capital Limited, soon after graduation two years ago. He said he had worked for a bit in Egypt before coming to Wharton, and wanted to work in this part of the Middle East, where he felt things were growing. “It’s got one of the youngest populations in world. Fifty percent of the population is under 25. And it has one of the fastest growth rates. Even on the reduced basis of the global slowdown, they are calling for 6 percent growth. Just those two numbers alone tells you about the opportunities here.”

Nearly 1.2 million people live in Dubai today, about eight times the amount who inhabited the small Arab emirate just 30 years ago. Those three decades have seen amazing growth of all sorts, and now a large corporation that does not have a presence in Dubai, or isn’t at least considering it, is clearly falling behind in the area referred to now as MENASA — Middle East/North Africa/South Asia. Even with the decrease in oil prices and the tightening of foreign investments — the dual engines that drive the region’s growth — Dubai’s significance in the region’s, and the world’s, economy is undeniable.

Raffi Amit, the Robert B. Goergen Professor of Entrepreneurship, and the academic director of the Wharton Global Family Alliance, has studied and worked with businesses centered in the region, seeing the changes firsthand. “Dubai doesn’t have any oil, so very early on, they established themselves as a center of finance, commerce, tourism, and real estate,” said Amit. “They have more gold than Fort Knox and more diamonds than Fifth Avenue. They have done a very good job in creating a tourism hub that people now come to as an alternative, say, to the Caribbean.”

Dubai, as was the rest of what are now the United Arab Emirates, was a British protectorate until 1971. Oil had been discovered there in the late 1960s, but not in the great quantities as had been found on the rest of the Arabian peninsula and across the gulf in Iraq and Iran. Many Lebanese, fleeing their country’s civil wars, settled in Dubai, giving the emirate an influx of intellectual capital. The royal family, now headed by Sheikh Mohammed Bin Rashid Al Maktoum, started the construction of the Jebel Ali port around that time, and it became the biggest man-made harbor in the world.

English is the primary business language, and religious culture has remained private, with few limitations imposed on secular and business life. “The city’s religion is commerce, in a way like America,” said Mario Moussa, the academic director of Wharton’s Executive Education program in Dubai, and coauthor of The Art of Woo: Using Strategic Persuasion to Sell Your Ideas with Wharton professor Richard Shell. “Most people are religiously observant. Cultural norms mean you don’t hug them or shake their hands in many cases, but residents consider themselves world citizens — non-ideological and supporting whatever relates to the business sector. That is what drives Dubai.”

Wharton programs, including Executive Education, have also come to Dubai, and not just as an alternative, but a destination in itself. Amit’s Wharton Global Family Alliance ran a conference in Dubai three years ago and recently presented another one for 50 business families there. Executive Education has done extensive work with Dubai World, the largest conglomerate business in the emirate, and is negotiating for sessions with other governmental and business entities there. The 2009 Wharton Global Alumni Forum for Europe, the Middle East, and Africa is scheduled there in March, and the Wharton Fellows conducted a Master Class in Dubai in October 2008.

“All these Wharton events in one place in a short time — it is unprecedented,” said Jeffrey Sheehan, Wharton associate dean for international relations. “It puts in context how Wharton feels about Dubai. It is creating a whole new crossroads. It is not just another place that pumps oil. Like bears to honey, there are a lot of people who have descended on Dubai in the last couple of years.”

An Instant Empire City

“People just don’t remember that Dubai has gone from a few thousand people living a nomadic lifestyle in 40 years to one of the world’s greatest economies,” said Michael Samaha, WG’97, who lives in Dubai and is the head of Morgan Stanley’s international management in the region. He was born in Lebanon, studied in the United States, and has lived in other places in the Middle East. “Only about 10 percent of the people who live here are actual Emiratis. The rest are expatriates.”

“The rulers here were intelligent in building a non-oil economy to take care of the rest of the business in this region,” said Samaha. “It is growing the economy here, not just depending on oil, and it will be interesting over the next few years to see how that will all play out.”

Moussa said while there is a lot of buzz about Dubai, especially among young people like Rashid and Samaha, its place as a financial and commercial powerhouse is not yet assured. Like all financial centers, Dubai has been impacted by the 2008 economic crisis, with stocks down 60 and 70 percent from the previous year. And like U.S. real estate boom markets like Las Vegas, the city has seen a decline in property values after a six-year building frenzy. In November The Wall Street Journal reported that residential resale prices had declined 19 percent from the previous month, while mortgage rates and required down payments had soared amid the international lending crisis. New construction was predicted to be hit even harder as foreign investors search for fresh capital and well-heeled buyers — two commodities that are becoming scarcer by the day.

“I am not sure as yet this is Dubai’s moment,” said Moussa. “About 15 or 20 years ago, Dubai looked 40 to 50 years into the future. It has invested in infrastructure and wants to create a gateway hub in the Middle East. Will it work? It has done well so far, but there are other competitors in the region like Abu Dhabi, and London and New York are still the strongest financial centers. Still, it is quite a transformation for a place that was nowhere not so long ago.”

Navin Valrani, W’93, has been in Dubai for most of his 37 years and so has seen this transition first-hand. He came to Wharton after growing up in Dubai, just before its biggest boom. Still, it was where he figured he would return.

“I always knew I would be back in the family business in Dubai,” said Valrani, who now runs the construction services business of the family conglomerate, the Oasis Investment Company/Al Shirawi Group of Companies. But instead of being resigned to being in that family business, he came back from Wharton to see the burgeoning possibilities.

“People over the last five years have talked about China and India, but Dubai, relative to its size, blows them away,” said Valrani. In a way, he expected that. He was born the year Dubai became independent from Britain and has seen its rise, whether in fits and starts early on, or more pronounced moves, as of late, since then.

“I have been so used to Dubai, that I really cannot imagine myself in an environment that is not ever-changing,” said Valrani. He sees the upcoming changes coming in three areas: infrastructure, tourism, and service.

“Roads, bridges, airports, and now even the Metro are always developing. Dubai has one of the most modern road networks, but even with the investments that the government has poured in, it is still unable to keep up with the population growth of the country,” he said.

A Service Economy

Dubai is all about service, according to Valrani.

“Service excellence is now so ingrained in Dubai’s culture that I can only see the city setting itself benchmarks against its own high standards,” he said. Yet it is in tourism that Valrani views Dubai will make its most unusual steps toward even global dominance.

“We have some of the finest shopping malls in the world, superb hotels, and a great mix of beach and desert for the outdoor enthusiast,” he said. “In the future, we have some magnificent theme parks to look forward to. I expect Dubai to be the numberone tourist destination in the world within the next seven years.”

Mauro Guillen, the director of the Lauder Institute and the Zandman Professor of International Management, who has been to Dubai, has also been impressed about what the emirate has done to attract tourists who would not have dreamed of going to the Arabian Peninsula for a relaxing vacation just a decade ago. His enthusiasm, however, is more measured, and he has reservations about Dubai’s future in these tough global times. The city-state borrowed heavily to finance its growth, and now repayment of the debt is a concern. While the young and go-getting people who have come to the city should not expect gold on the streets, Guillen said he felt the government — the area’s primary investors — have done good planning.

Guillen said the idea of creating a tourism center feeds into other businesses in Dubai, particularly construction. Even the extreme summer heat — the high temperatures average in the triple digits Fahrenheit from May through September — does not seem to be a deterrent to some.

“People from India and Pakistan and the Middle East and Russia go there for a beach vacation and more,” said Guillen. “When I went there, there were certainly a lot of Russians. There was shopping, and there are sporting events and shows of all sorts. In November, the temperature was quite pleasant. For the billion or two people who are within a five or six hour flight, this could be their Las Vegas or Disney if it continues as it has been — and that will feed other businesses, too.”

Leadership for a Growing Business Capital

The Wharton influence should be there as a part of the intended growth in Dubai. In 2006, Executive Education began work with Dubai World, after an introduction from the Wharton Global Family Alliance, to design, develop, and implement a custom program that would meet Dubai World’s corporate goals. According to director Diane E. Eynon, the Dubai World Leaders Program is for high-potential executives from the holding company’s various subsidiaries. “It’s designed to enhance their strategic thinking and leadership capabilities, and encourage broad perspectives on global business,” said Eynon. By May 2009, 135 executives will have completed the program.

The nine-month Dubai Leaders Program is divided into five modules. Two modules include six weeks at the Steinberg Conference Center in Philadelphia for classes with Wharton faculty. There are also modules in Dubai as well as a global learning journey to Singapore, Hong Kong, and China. “We try to provide a comparative lens. Participants are asked to identify and compare the relative strengths and weaknesses of Singapore and Hong Kong and reflect on how these compare with Dubai’s own strengths and weaknesses. We want them to explore the strategic implications these answers might have for the operations of Dubai World in Dubai and the rest of the world,” said Eynon.

On the expatriate end, the Wharton Fellows master class brought 48 senior corporate executives to Dubai from October 11 to 15, 2008, under the rubric, “Islam and the West: Insights and Business Opportunities.”

“What people learned were all the intricacies and details of what it would take to run a successful business in Dubai,” said Suzanne A. DuBose, the director of the Wharton Fellows program. Wharton professor Bulent Gultekin, the former President of the Bank of Turkey, led a master class on growth in the Middle East in general, and Dubai in particular. Another session examined how women could better do business in the modern Middle East, and another, the differences — particularly the general ease — of business protocols and culture in Dubai compared to more fundamentalist places like Saudi Arabia.

“The bottom line, though, was that there are at least 1.3 billion people a short plane ride from Dubai, and if you are not reaching them, you should really consider opening up your market to those people,” said DuBose.

Chuck Miwa, the chief operating officer at Informa Research Services, Inc., a Calabasas, California, media, conference and publishing company, was one of those fellows. He said Informa had done a little work in Dubai, but it seemed to him that having gone and seen what was there would make it a must-do for any company that needed a Middle East presence.

“There are a variety of languages spoken and other things attendant with being a major city — culture and cars and even traffic,” he said. “Certainly coming in there with the United States in a financial crisis, it almost seems like the roles are reversed. There are the biggest buildings and the most cranes and high growth rates. People are talking all about it, and everything is made to seem so exciting.”

An Expatriate Culture Takes Root

Samaha, the Morgan Stanley banker, said that while he is happy to be working in Dubai, it may not be the do-all and end-all for future business. First of all, he said, that the expatriate community is so large may make things exciting, but it also means that no one is committed to staying long. For every one who does, another few spends a couple of years as a way-station worker. Then there are the other competing states in the area, which are watching the innovations in Dubai and resolving not to be passed by.

“Some of the real money in the Emirates is in Abu Dhabi. The ruler of the United Arab Emirates is from there and there is a lot of oil money there. Then there is Bahrain, which has some of the financial and commercial infrastructure,” he said. “But they have been smart here in Dubai and gone toward the banking and the shipping and, especially, the tourism, which no one else is doing.”

It is hard to separate, said Professor Amit, Dubai’s desire for cultural advances and the tourist dollar from the drive to be a business center in general. Not only does the cultural/tourist nexus fuel the real estate and construction boom, but it also brings people into the city-state who spend their money, and who may eventually do business there.

Each year there is a Dubai International Film Festival. Elton John, Santana, Aerosmith, Celine Dion, and Shakira have played big concerts in Dubai. The International Cricket Council moved its headquarters there from London. There is a Dubai Desert golf tournament that attracts the best pros from around the world. The Palm Islands reclamation project is primarily designed to build resort hotels, amusements, and shopping. The world’s tallest man-made structure, the Burj Dubai, is in Dubai. There are indoor ski slopes and water parks, and thousands of workers from as far away as the Philippines coming to work in them.

“All of this says to someone coming to business in Dubai that this is a place to be,” said Amit. “People like to go there. It is more liberal than any of the neighboring countries and people are conscious of how to do business. In our case of the family groups we talk to, it is about wealth growth and preservation, and they feel this is the way to do it.”

Rashid said that as new people float into Dubai, they find ways to bring their ideas to a new market. For instance, he said, only 2 percent of air traffic in and out of Dubai is on low-cost carriers, compared to as much as 30 percent in the United States. So Air Arabia, a five-year-old airline is adopting the Southwest Airlines model to bring that service to the area.

“Untapped businesses, untapped resources, those are hot here,” said Rashid. “This is the whole work perspective of why I wanted to work here. You are seeing a lot of human capital coming into the region. I just don’t find any drop off from places like New York and London. Everything is geared toward the high end, and I really feel there is no place like it in the world right now.”

Writer Robert Strauss is a frequent contributor to the Wharton Alumni Magazine.